Airline frequent flyer programs: equity and attractiveness

Abstract

Abstract The scheme of a frequent flyer program describes how travelers accumulate and redeem their frequent flyer miles in the program, and determines the amount of benefits travelers can receive from the program (e.g., number of free trips). In the US, there are three basic types of frequent flyer program schemes (standard, discount, and non-mileage schemes). This paper investigates, by type of traveler, which scheme is most (or least) attractive to customers, so that each airline can select the most appropriate (or attractive) scheme for its target audience. The study results imply that the “non-mileage” scheme may be most attractive to travelers with low average trip miles (flown miles per trip), while the “standard” scheme may be most attractive to travelers with high average trip miles.